Understanding Credit

The first step toward purchasing and owning a home is to secure financing. To secure financing you will need to authorize your credit report to be pulled by a lender.

Your credit score is a number that is computed which is meant to determine your credit worthiness. The FICO score is the most common and ranges from 350-850. It is a mathematical formula based on your payment history, debt ratio, length of credit history, types of credit and credit inquiries. The higher your credit score, the better the loan programs are that will be available to you.

A higher credit score, obviously, is desirable. It can help you with obtaining better auto loans, lower credit card rates and lower mortgage rates. Better rates translate to money saved over the course of a loan - that money can amount to many thousands of dollars, especially on home loans.

Poor credit scores lead to higher interest rates for credit cards, auto loans and home mortgages. Nowadays, your credit score can even affect your insurance rates and your employment. It is to your benefit to obtain and maintain a high credit score.

Improving Your Credit

Although there is no quick fix, managing your credit responsibly over time will raise your credit score. Here are some tips:

Pay your bills on time

If you missed payments, catch the up to be current...then stay current!

Be aware that paying off a collection will not remove it from your credit report - it stays on for 7 years